I'm also running into this bug. It seems to be an ssh bug, but is triggered by the client program.
Here is the information requested from the previous poster that should be enough to track this down. Another poster in another thread mentioned that the last working version was 4.1.9. I can't confirm the exact version number yet, but in the past I have transferred large files from my server, using winscp with no problem. So this does seem to be something that was changed in recent versions of winscp.
I'm using Redhat Enterprise Linux 3, with the latest available openssh for this platform, which is 3.6.1p2 with their backported fixes.
Also was using WinSCP 4.2.7 on Windows XP, upgraded to version 4.3 beta with same results.
this is the info on this error from my server's logfile, /var/log/secure:
Nov 8 19:21:00 server sshd[3621]: fatal: buffer_append_space: alloc 10514432 not supported
Nov 8 19:26:52 server sshd[4080]: fatal: buffer_append_space: alloc 10522624 not supported
Nov 8 19:28:43 server sshd[4363]: fatal: buffer_append_space: alloc 10522624 not supported
Here is some info on the bug that may be helpful for making a workaround:
184357 – buffer_append_space: alloc not supported Error
896 – Improper Input buffer handling
Let me know if you need anything further, thanks.